The US dollar and yen attracted buyers on Friday as investors looked for safety amid news that the eurozone fell into recession and world leaders met for a summit in Washington on the global financial crisis.
At 10pm GMT, the euro fell to US$1.2591 from US$1.2779 late in New York on Thursday.
The dollar dropped slightly to ¥97.06 from ¥97.67 on Thursday.
The pound remained sharply lower meanwhile at US$1.4733 from US$1.482, after hitting a six-year low of US$1.4557 earlier in the week.
The market digested news that the eurozone was in recession, and data showing a steep fall in US retail sales, the main driver of economic activity.
The US Commerce Department said the country’s retail sales tumbled a record 2.8 percent last month as consumers hunkered down in the face of a sharply slowing economy.
The retail report “wasn’t fundamentally bullish for US assets, but instead, the disappointing nature of the news triggered flight to quality,” Terri Belkas at Forex Capital Management said.
The dollar and yen have been the main beneficiaries of the financial turmoil on the assumption that the US and Japanese economies are best prepared to weather the global economic storm, but some of the moves are hard to explain.
“Recent foreign exchange movements have exceeded what fundamental economic discrepancies justify,” independent currency analyst Larry Greenberg said. “The biggest winner in this reconfiguration has been the yen followed by the dollar. Commodity-sensitive currencies and sterling are the main losers.”
The market saw news that the economy of the 15 nations sharing the euro has slumped into recession for the first time, with GDP falling 0.2 percent in the second and third quarters.
Analysts said this would likely lead to rate cuts by the European Central Bank (ECB). Traditionally, lower interest rates make a currency less attractive to investors even though they can help to boost economic growth.
The ECB last week cut its key lending rate by 0.50 percentage points to 3.25 percent.
Despite sharp falls in US stocks markets on weak retail data, economists at Commerzbank said the dollar was still viewed as a relative safe haven in gloomy economic times.
In late New York trading on Friday, the dollar stood at 1.1976 Swiss francs from SF1.1866 on Thursday.
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